Manufacturing jobs find way back to U.S.

‘Insourcing’ gains as employers cite high shipping costs and quality control

“Happy talk about insourcing (cannot) overcome the damage from decades of reckless trade expansion with protectionist, export-obsessed economies in Asia, Europe, and Latin America,” said Alan Tonelson, research fellow at the U.S. Business and Industry Council.

Tonelson said the government needs to revamp trade policies to ensure that U.S. factories are on a more even playing field with foreign plants.

But manufacturers say the playing field between the U.S. and China is already getting more even, thanks in part to rising labor costs. As recently as 2000, Chinese workers averaged only 72 cents per hour, but by 2015 they are projected to be making $6.31, according to the Boston Consulting report.

That’s still far cheaper than U.S. workers, who are projected to average $24.81 even in low-cost states in the Deep South, the report says.

But when factoring in such things as productivity and shipping costs, as well as the hassles of dealing with a foreign bureaucracy, the threats to intellectual property and the logistical headaches of overseeing a workforce thousands of miles away, the rising costs are enough to whittle down the advantages of doing business in China.

How can US compete?

“People ask us how we can compete with China labor — and the fact is, we can’t,” said Fogliani, a contract manufacturer who produces goods for clients who can’t handle the production themselves. “We compete on other things: the cost of freight and customs duties and the time involved in having your products come in on a boat.”

And then there is the question of quality.

“I’ve witnessed too many guys jumping way ahead of themselves by producing things in China,” said Adrian Pelkus, head of A Squared Technologies, a contract manufacturer in San Marcos. “They often end up getting a boatload of flawed parts, and they can’t get any tweaks or changes made to the products and they can’t get their money back.”

One of Pelkus’ clients brought him crateloads of medical devices made in China that had to be taken apart and reassembled because of a mistake in one of the device’s tiniest parts. Another client hired him to assemble medical pumps with parts shipped from China. But when the parts arrived, they were so flawed that the project was temporarily canceled.

“I had hired 22 people to work on that project and we were ready to run in two shifts, but the whole thing crashed because we didn’t get the quality parts necessary,” he said. “There were 400 separate parts in the device, and most of them had to be remade. If they’d been made in the U.S., things would’ve been different.”

The project eventually went ahead. But even then, there were so many problems that Pelkus says he barely broke even.

Fogliani said that it’s not that the Chinese are shoddy workers. Part of the problem has to do with communicating in two languages over long distances. “U.S. companies can make mistakes, too, but here you have a better chance to catch them relatively early in the process, instead of paying for 50,000 pieces to be shipped across the ocean,” he said.